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DTCC Launches Enhanced Cost Basis Reporting Service

The service acts as a central communications hub for transmitting cost basis information among broker/dealers, transfer agents, issuers, mutual funds and custodian banks.

The Depository Trust and Clearing Corporation (DTCC) has launched an enhanced service to help financial firms and other market participants comply with a new January 2011 regulatory mandate on reporting cost basis accounting information to investors and the federal government.

DTCC’s enhanced Cost Basis Reporting Service (CBRS) solves the technology and reporting challenges faced by the industry in meeting a key element of The Emergency Economic Stabilization Act of 2008. The Act requires financial intermediaries to pass cost basis information among one another when assets move among firms, according to today’s press statement.

The service acts as a central communications hub that transmits cost basis information among broker/dealers, transfer agents, issuers, mutual funds and custodian banks in a secure electronic environment. It eliminates the need for market participants to undertake the expensive and time-consuming task of establishing potentially hundreds of new connections to transmit this information, said DTCC.

“The CBRS platform promotes standardization and centralization while also mitigating operational risk for our customers, reducing the cost of compliance and improving overall processing efficiencies,”commented Susan Cosgrove, DTCC managing director, Clearance and Settlement/Equities, in the company’s release.

DTCC Solutions LLC, a wholly owned subsidiary of DTCC, adapted the existing CBRS technology to build the enhanced service in less time – and at a lower cost – than it would have taken if the service had to be developed from scratch. The service also offers enhanced web access to give firms the flexibility to log on via the Internet.

DTCC began development of the service in 2009 after the industry approached the company to seek its help in complying with the new reporting requirement called for in the law. DTCC participated in the Cost Basis Steering Committee, which included a broad coalition of market participants, to begin scoping out a solution and establish best practices for basis reporting. The Committee included broker/dealers, transfer agents, mutual fund companies and industry organizations such as the Investment Company Institute, the Securities Transfer Association, and the Shareholder Services Association.

“Financial intermediaries recognized early on that they would need to overcome significant operational challenges in a relatively short timeframe to be in compliance with the law by January 2011,” Cosgrove said. “We worked closely with industry representatives for more than a year to ensure the service would achieve that goal while still meeting the unique needs of financial intermediaries.

The law includes requirements for financial intermediaries to transfer cost basis information on mutual funds by January 1, 2012, and debt, options and other securities by January 1, 2013.

“We’ve already begun work on enhancements to the service to allow firms to comply with future regulatory mandate,” added DTCC’s Cosgrove in the release.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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